The correct answer is B because the total return of an index includes both price appreciation and income (dividends). Here's the breakdown:

1. Stock 1:

   • Price return: ($8 - $10) / $10 = -20%
   • Total return: -20% + 2% (dividend) = -18%

2. Stock 2:

   • Price return: ($24 - $20) / $20 = 20%
   • Total return: 20% + 2% (dividend) = 22%

3. Stock 3:

   • Price return: ($30 - $30) / $30 = 0%
   • Total return: 0% + 2% (dividend) = 2%

The equal-weighted index return is the average of the total returns: (-18% + 22% + 2%) / 3 = 2%.

Why not A or C?

• A ignores dividends, calculating only the price return, which averages to 0%.
• C incorrectly suggests a 6% return, which is not supported by the calculations.